Marketers shifting ads from TV to digital

Snack food giant Mondelez International announced a deal last week with Google to increase video advertising on YouTube, joining Allstate insurance and other major marketers in shifting advertising budgets from traditional to digital media.

The trend could take a bite out of the $78 billion U.S. television advertising market, as dollars follow viewers online. Commercials may look different as well, with marketers turning to digital content creators to do what they do best — produce buzz-worthy online videos.

Bonin Bough, vice president of global media and consumer engagement at Deerfield-based Mondelez, said the company will employ top YouTube talent as part of the deal, making for a more cost-effective digital strategy.

"Consumers are consuming more online video year over year, and they're consuming more content year over year," Bough said. "It's very difficult to feed that voracious appetite with the current economics that we have around video content creation."

Mondelez, an international snacks business that emerged from the 2012 split of Kraft Foods, has such powerhouse brands as Oreo, Nabisco, Cadbury and Trident, which are marketed in 165 countries. The company reported 2013 revenue of $35 billion.

In 2013, Mondelez spent $181.6 million on advertising in the U.S., according to Kantar Media, with more than two-thirds of that budget used for TV advertising. Digital accounted for less than 5 percent of the total advertising budget last year.

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The Google agreement is part of a broader strategy by Mondelez to shift 10 percent of its advertising budget to online video in 2014, the company said. The deal was brokered by Chicago-based Starcom MediaVest Group, and it covers markets in North America, Europe, Latin America, the Middle East and Asia. Terms were not disclosed.

Marketers are spending more on digital video advertising in a bid to keep up with consumers.

Research firm eMarketer estimates that daily time spent with digital video has risen from 6 minutes in 2010 to 55 minutes this year. About 195 million people in the U.S. watch digital video at least monthly. That viewership number is expected to grow to more than 212 million by 2018, or more than half the U.S. population.

Digital ad spending is expected to top $50 billion this year, or nearly 30 percent of total U.S. ad spending, according to eMarketer. While TV still has the largest slice of the ad spending pie, at 38 percent, the research firm projects that it will be surpassed by digital within four years.

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YouTube, which is owned by Google, has nearly 20 percent of the U.S. online video advertising market, with a projected $1.13 billion in revenues this year, according to eMarketer. Overall U.S. digital video ad spending is up 56 percent this year.

Northbrook-based Allstate Corp. spent more than $641 million on advertising last year, with nearly $467 million allocated to television, according to Kantar Media. Lisa Cochrane, senior vice president of marketing for Allstate, said the insurance company is shifting 20 percent of its media budget to digital, with online video at the center of the increase.

Digital's growth may already be affecting U.S. television advertising spending, which last year totaled $78 billion, according to Nielsen. The annual growth rate for TV advertising slowed to 3 percent in 2013 from 6 percent the previous year.

Bough said the increased digital spending would affect more than just the TV budget for Mondelez.

"It's sourced from across the media mix," Bough said. "We're continuing to focus on measurement and look at those things that aren't delivering, and shifting that to this vehicle that is delivering."

He also said that the distinction between online viewing and television viewing is becoming less relevant for Mondelez, which simply wants to reach the largest possible audience as efficiently as possible.

"This is no longer a world of TV versus online video," Bough said. "We see this as a world of video. We're reaching more people, we're doing it more efficiently, and it's driving greater return."

In addition to the increased advertising commitment, Mondelez will work with Los Angeles-based YouTube content creator Fullscreen, which will help the company develop custom video campaigns to supplement its traditional TV commercials.

That opens the door to a whole new breed of celebrity spokesperson.

Fullscreen manages a talent roster of about 80 homegrown YouTube celebrities, such as 15-year-old Anthony Quintal, better known to millions of online fans as sassy video blogger Lohanthony. A joint venture between AT&T and the Chernin Group announced last month that it had acquired a majority stake in Fullscreen for a reported $200 million to $300 million.

"We haven't spent any money on TV in 2014, and we've definitely upped the amount we're spending on digital," said Chris Ruszkowski, vice president of advertising and marketing for Quiznos.

The company spent nearly all of its $26 million advertising budget on television last year, according to Kantar Media.

This year, Quiznos is focusing on developing original video content, with movie and TV parodies garnering big numbers on YouTube and its own website, toasty.tv. Video mashups such as "The Waze Runner" and "Mad X-Men" populate the site, along with games, music videos and a few well-placed ads for Quiznos sandwiches.

The original content has shown promise at engaging a hard-to-reach young male audience, a target for the sandwich chain, Ruszkowski said.

In addition to its beefed-up digital strategy, Quiznos is funneling some of its former TV advertising budget into print and local store marketing. The company expects to have enough left over to pocket some substantial savings.